Processing .....please wait.. 
The article has been forwarded.... 
Govt. pushes Banking reforms
By agencies
|
Thursday, 05 May 2005, 19:30 IST
NEW DELHI:In a major push to financial sector reforms, the government has approved two bills that will give Reserve Bank of India powers to revise SLR and CRR limits of commercial banks.
The Cabinet, which met under the chairmanship of Prime Minister Manmohan Singh yesterday night, also cleared the Credit Information Companies (Regulation) Bill to help banks cut non-performing assets.
"The Cabinet approved amendments in three bills - Reserve Bank of India Act of 1934, Banking Regulation Act of 1949 and Credit Information Companies (regulation) bill of 2004," Information and Broadcasting Minister Jaipal Reddy, said after the meeting.
The bills would be introduced in the current session of Parliament, he said.
The amendments in the BR Act and RBI Act will give operational flexibility to RBI for revising the limits on Statutory Liquidity Ratio and Cash Reserve Ratio of commercial banks, which will release more funds for productive purposes.
At present, the two acts restrict the SLR to a minimum 25 percent of bank deposits and CRR to 3 percent. The bill provides for voting rights to investors in banks according to their shareholding, which would encourage FDI in banks.
The amendment in BR Act would enable RBI to classify securities issued by center, states and other entities as "approved securities". It will also enable banks to issue preference shares.
RBI will also be empowered to grant exemption to any bank to grant loans and advances to any company. The amendment will also give RBI the powers to inspect the financial statements or business affairs of associate entities of banks.
RBI will also be able to supersede the board of a bank after the amendment. The bill also provides for primary credit societies to obtain license from RBI for carrying out banking business. RBI will also be empowered to order special audits of their accounts in the public interest.
The amendments in the RBI Act will empower Reserve Bank to revise the CRR. It will also enable RBI to effectively regulate the market for interest rate contracts including conventional securities, money market instruments and derivatives.
The bill to amend Credit Information Companies Bill will facilitate setting up of Credit Information Bureau that will collect, share and disseminate information of loans taken from banks.
This will significantly improve the quality of credit appraisal and decisions and help banks reduce NPAs.